Commercial landlords have raised concerns that changes made to bailiff regulation last year have made it easier for tenants to pay their rent late and remove valuable items from their premises ahead of debt collection.
The British Property Federation (BPF) has raised such concerns in a submission to a Ministry of Justice (MoJ) review of the first year of the revised Commercial Rent Arrears Recovery (CRAR) regime.
The new CRAR legislation requires an Enforcement Agent (as bailiffs are now known) to serve a notice on a late-paying tenant giving a minimum of seven clear days for a debtor to pay before it is able to enforce on goods. This has led to a belief amongst landlords that some tenants are using the regime as a “cheap overdraft facility” to delay payment.
The BPF has submitted evidence to show that some tenants have used this notice period to delay paying overdue rent on as many as 90 occasions across their stores over the year since the introduction of CRAR. This is particularly worrying for small landlords, who risk defaulting on their own loans if their rental payments are late.
It has suggested that this could be because the statutory fee defined by the legislation to be charged by Enforcement Agents (£75 + VAT, regardless of the level of rent outstanding) is not enough of a deterrent. It recommends that the MoJ changes the fee to be 2.5% of the debt at Enforcement Notice, in order to make it more proportionate.
The BPF has also outlined further concerns that Enforcement Agents are no longer required to take an inventory when they serve notice. In some cases, this has led to tenants removing the contents of a store before Agents arrive, who are then unable to prove that there were goods within a unit.
It has recommended that the MoJ allows 24-hour notice for an inventory check once Notice is served to combat this.
Melanie Leech, chief executive of the British Property Federation, commented: “While CRAR has not been problematic for every landlord, there are some simple steps that the MoJ could take to protect those who will struggle when they receive late rental payment.
“Making the fee system more proportionate would both protect smaller landlords and act as a deterrent for tenants with particularly large arrears. Allowing time for an inventory check would add a further layer of protection for landlords, who are currently just relying on a tenant’s good nature.”
